California has a unique opportunity to use competition to combat climate change and generate jobs and innovation. By leveraging a very modest share of revenue from California’s new cap-and-trade program to award an annual Green Prize, California can motivate and inspire innovators to leverage their intellectual and financial capital to solve our climate change crisis.

There is a pool of money available for reducing or mitigating climate change generated from the sale of pollution “allowances” under AB 32, California’s cap-and-trade program that went into effect last fall. According to Gov. Jerry Brown’s recent proposed budget and an analysis by the Legislative Analyst’s Office, the pool will be in the hundreds of millions of dollars this fiscal year and multiple billions over coming years. From that pool, California should set aside one or more buckets of $10 million a year for an annual Green Prize for innovators who are first to achieve some specific groundbreaking technology that meets thoughtfully established, published criteria.

Prizes designed to facilitate technological breakthroughs have a proven track record. The Orteig Prize inspired Charles Lindbergh in 1927 to be the first to fly nonstop from New York to Paris. The $10 million Ansari X Prize was awarded to Paul Allen’s team in 2004 for the creation of a privately financed spacecraft, and the contest generated more than $100 million in private investment in spacecraft innovation. Both prizes launched new industries.

California could run this Green Prize through the Air Resources Board or partner with outside experts such as California-based Cleantech Open or the X Prize Foundation, each of which has worked with other government agencies (including the U.S. Department of Energy and NASA) to manage similar competitions. A panel of experts can recommend high-impact breakthrough technologies currently in their infancy and identify criteria to justify the award of a Green Prize, including milestones related to demonstration of an effective prototype or readiness for widespread adoption.

To accelerate innovation and ensure the money is spent as intended, if the prize criteria are not met within three years of the announcement of a particular Green Prize, it should expire, and the prize money should be applied to a new Green Prize or repurposed for more conventional climate change mitigation efforts. The prize expiration creates a no-lose opportunity for California. Either a high-impact innovation is created, or the money is returned to the climate change revenue pot.

Private investment in clean technology has dropped, just as the impacts of climate change are becoming more apparent. Deployment of existing technology is not enough for California to reach its legally mandated goal of reducing greenhouse gas emissions to 80 percent below 1990 levels by 2050, according to a 2011 report by the California Council on Science and Technology. Achieving that aim will require “intensive and sustained investment in new technologies,” the study concluded. A Green Prize where a desired innovation is created or the prize money is recycled by the state creates a win-win opportunity for California.

State Sen. Jerry Hill, D-San Mateo, has said that the Green Prize “would create an investment in our future.” Assemblyman Rich Gordon, D-Menlo Park, has stated that the idea “captures California’s spirit.” Assemblyman Kevin Mullin, D-San Mateo, finds it a “great way to incentivize action to solve the complex problem of climate change.” Assemblyman Paul Fong, D-Cupertino, called this a “great idea.” San Francisco Board of Supervisors President David Chiu, Joint Venture Silicon Valley and Environmental Entrepreneurs have all endorsed this idea. Let the contest begin!

Daniel Yost works with entrepreneurs as a technology lawyer in the Silicon Valley office of Orrick, Herrington & Sutcliffe LLP. He wrote this for this newspaper.